Trump pick for vice chair pledges support for key Fed goals

WASHINGTON (AP) — Richard Clarida, President Donald Trump's nominee for the No. 2 post at the Federal Reserve, pledged support Tuesday for the Fed's twin goals of stabilizing inflation and maximizing employment while also declaring the importance of the central bank's independence.

The seal of the Board of Governors of the United States Federal Reserve System is displayed in the ground at the Marriner S. Eccles Federal Reserve Board Building in Washington. Richard Clarida, President Donald Trump's nominee for the No. 2 post at the Federal Reserve, pledged on Tuesday, May 15, to support the Fed's twin goals of stabilizing inflation and maximizing employment while also declaring the importance of the central bank’s independence.

May 15, 2018

Clarida, an economics professor at Columbia University who is among the nation's leading experts on monetary policy, is the latest of several Trump selections to the Fed's board. In filling those key slots, the president has been gradually putting his personal stamp on the Fed.

Along with Michelle Bowman, another Trump nominee to the seven-member board, Clarida received generally favorable reviews during a confirmation hearing before the Senate Banking Committee. Both are expected to win approval, although some committee Democrats questioned their commitment to tough oversight of the nation's banks.

Bowman, the first woman to serve as banking commissioner in Kansas, was chosen by Trump to fill the Fed board seat reserved for someone with experience in community banking. Clarida and Bowman both gave an emphatic yes when asked by Sen. Sherrod Brown, D-Ohio, whether they thought it was important for the Fed to remain independent from the president. Clarida said that neither Trump nor any other member of his administration had said anything during his interviews that could compromise the Fed's independence.

"I had a number of meetings over several months with a number of officials, including the president, and in no meeting at no time did I ever have any reason to question the independence of the Federal Reserve," Clarida said.

In an interview last week with Politico's "Morning Money" podcast, Kevin Warsh, a former Fed board member who was on Trump's short list for Fed chairman, said that when Trump interviewed him for the post, the president was direct about how he thought interest rates should be managed.

Warsh said Trump had questioned him about the need to keep rates low and did not appear to view the Fed as an independent body. "If you think it was a subject upon which the president danced around, then you'd be mistaken," Warsh said in the interview. "The president has a view about asset prices and stock markets."

Trump has a rare opportunity to select six of the Fed's seven board members in his first two years in office. In addition to choosing Jerome Powell to succeed Janet Yellen as chairman, Trump also selected Randal Quarles, a Utah investment banker, to be the vice chairman for supervision.

Though Trump was critical of the central bank during the 2016 presidential campaign, he has drawn his Fed nominees from the ranks of mainstream economists rather than from the conservative economists who assailed the Fed's unorthodox actions to address the 2008 financial crisis and to the deep recession that followed.

Conservative Republican lawmakers in the House have for years unsuccessfully pushed legislation to limit the Fed's discretion. One such measure would have eliminated the Fed's dual mandate to pursue maximum employment and stable prices. The measure would have limited the Fed to managing interest rates to keep inflation stable.

In his testimony, Clarida declared support for both goals of full employment and stable prices and said that if confirmed, he would "take a balanced approach to achieving these important objectives." Clarida, who has won the endorsement of a group of leading economists including former Chairman Ben Bernanke, is expected to be a key adviser to Powell, an attorney by training and the first non-economist to lead the Fed since the late 1970s.

The vote by the full committee will occur after Clarida and Bowman have time to respond to follow-up question from the committee. Committee Chairman Mike Crapo, R-Idaho, set May 29 as the deadline for responding to the panel's questions.